Appellant's Belief Upheld: Business Services Exempt

The Tribunal held in favor of the appellant, finding that the demand for business auxiliary services and technical inspection and certification services was not sustainable due to limitations and merit. The appellant's bonafide belief, supported by relevant decisions, and the exemption under Notification No. 41/2007-ST were key factors in the decision. The judgment, delivered by Members (Judicial) and (Technical) of the Appellate Tribunal CESTAT Kolkata, set aside the impugned order and allowed the appeal with consequential relief on 28 June 2023.

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Issues involved:
The judgment involves the alleged non-payment of service tax on a reverse charge basis under two taxable categories: (i) business auxiliary services in respect of export orders procured from foreign agents and (ii) technical inspection and certification services provided at the discharge Port by a non-resident service provider.

Business Auxiliary Services:
The appellant, engaged in exporting iron ore fines, availed the services of foreign brokers and commission agents for procuring export orders. The appellant contended that they believed these services were not taxable due to a legal opinion obtained in March 2008 and were exempted under Notification No. 41/2007-ST. The appellant argued that the situation was revenue neutral and no intent to evade tax could be attributed. The Tribunal found that the burden of proving malafide was on the revenue, and the appellant's bonafide belief was supported by relevant decisions. The Tribunal held that the demand for business auxiliary services from October 2007 to March 2011 was hit by limitation and set it aside.

Technical Inspection and Certification Services:
Regarding technical inspection and certification services, the appellant argued that these services did not fall under Rule 3(ii) of the Taxation of Services Rules as they were not performed wholly or partly in India. The Tribunal found merit in the appellant's submission and noted that the services were used for export, exempted under Notification No. 41/2007-ST. The Tribunal referenced a similar case where the tax demand was dropped, emphasizing that the services were utilized for export. The demand for technical inspection and certification services from October 2007 to March 2012 was deemed not sustainable on merits and limitation. The impugned order was set aside, and the appeal was allowed with consequential relief.

Separate Judgment by Judges:
The judgment was delivered by Hon'ble Shri P.K. Choudhary, Member (Judicial) and Hon'ble Shri K. Anpazhakan, Member (Technical) of the Appellate Tribunal CESTAT Kolkata on 28 June 2023.

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